Corporate Settlements from a Partner’s Perspective

Two decades or so ago criminal prosecution for corporations changed. Instead of striving to prove criminal intent and secure guilty verdicts in a jury trial, the Department of Justice (DOJ) moved toward a more expedient system of criminal investigation and prosecution by instituting the Non-Prosecution Agreement (NPA) and Deferred Prosecution Agreement (DPA) resolution methodology. The advantages included huge monetary yields in penalty fees and other forms of restitution without actually finding anyone guilty of anything (aka nolo contendere) in a timelier manner. For a partner in a business it became a two-edged sword.

White collar crimes include a long list of violations that may involve fraud, antitrust, bribery, tax evasion, price-fixing, foreign corruption as well as environmental, occupational, and safety infractions. As a partner, the penalty phase of the resolution process can have far-reaching effects that negatively impact innocent parties as well the individual who committed the crime. It would not be uncommon for a combination of restitution measures to include forfeiture, probation, termination of employment, legal and structural governance reforms and/or monetary sanctions. Attorney Sean Hecker, a Partner with Debevoise & Plimpton recently detailed this process in an interview with Corporate Crime Reporter.

The prosecutors in the U.S. Attorney’s Offices throughout the nation work closely with the criminal division of the Department of Justice to determine the appropriate prosecutorial resolution. Although only one partner may be guilty of wrongdoing, all partners are held accountable. Depending on the type of white collar crime and whether or not the wrongdoer voluntarily discloses and cooperates with the investigation, NPA and DPA settlements can be substituted for plea agreements. Even though the former may be preferable to a partner in that no criminal charges will ever appear on an individual’s record, the collateral consequences of such agreements could change a life-path in ways that are personally intolerable.

There is much debate on the efficacy of utilizing NPA and DPA resolution agreements due to a number of factors. On the one hand, their use is seen as a quick and efficient way of settling corporate corruption while on the other hand their use bypasses the judicial system so there is no recourse for appeal and the statute of limitations on restitution does not apply. When using NPAs and DPAs, the federal prosecutor is the judge and jury which undermines the principles of separation of powers. Additionally, they could require a corporation’s permanent future cooperation. Again, as an innocent partner in a company the consequences of the agreement could limit life choices.

NPAs and DPAs benefit corporations in that they are written to avoid the harm of indictment and trial. At the same time, they do require substantial changes in governance that are ongoing and ban public statements that may suggest the company was free from any wrongdoing. Institution of consequences outlined in the agreements are believed to deter future criminal behavior, but whether or not that is true has yet to be determined. The result of such consequences often give rise to substantial operational and financial burdens as well as limit a company’s options in subsequent litigations. Partners need to keep in mind that although there are enormous advantages of DPAs and NPAs over indictment and trial, agreements of that kind have severe consequences that may last a lifetime.